In this blog, we will be exploring the relationship between customer experience and compliance in financial institutions. We’ll delve into what customer experience means, why customer experience is so crucial to financial institutions, and how compliance requirements relate to efforts to improve customer experience.

Compliance & Customer Experience

As discussed in our last blog, Compliance & Customer Experience: Top Compliance Challenges for APAC Financial Institutions, it is not just financial and legal penalties that financial service providers risk with patchy, disconnected risk and compliance management systems. The impact on customer experience can also be substantial—with real competitive consequences.

Essentially, customer experience (also known as CX), is a measure of how easy and pleasurable doing business or interacting with an organization is from the customer’s perspective. It is the accumulation of every interaction a customer has with an organization, at each touchpoint, and includes rational, as well as emotional, factors that combine to create an overall impression. The business implications of a good or bad customer experience can be summed up simply:

“If a customer likes you and continues to like you, they will do business with you. If they don’t, they won’t.” — Paul Greenberg

Or, put another way:

“Customer experience is defined as the sum total of conscious events, as a coordinated series of interactions between a customer and a brand to accomplish anything. Above all words – a customer experience is defined by the customer, for the customer, at each touch-point, each time.” — Esteban Kolsky

Why is Customer Experience so Important?

“Customer experience is the last source of sustainable differentiation and the new competitive battleground.” — Tiffani Bova, Gartner Vice President and Distinguished Analyst

Customer experience is important because, as the above quote states, it is all about competitive advantage, not just now, but in the long term.

The days when people would tolerate average or even poor experiences are fast drawing to a close, if they have not already.

Esteban Kolsky, former Gartner Analyst and current well-renowned customer experience expert, conducts an annual survey of customer experience professionals, and reported these findings from the last survey:

  • It is 6-7x more expensive for companies to attract new customers than to keep existing customers.
  • 66% of consumers who switched brands did so because of poor service
  • 55% of consumers are willing to pay more for a guaranteed good experience. Kolsky points out the word ‘guaranteed,’ noting that customers are no longer satisfied with just being promised a good experience.

Customer experience is essential to attracting and retaining customers, and a crucial way to differentiate between companies in highly competitive markets.

How does the current approach to compliance affect customer experience?

Fragmentary compliance and risk management systems lead to complex, rigid business processes. This can then cause delays in service and contribute to product complexity, which is the antithesis of good customer experience (simplicity being a key characteristic).

Customers expect access to services and information, when, and on whichever channel, they want. Fragmentary compliance systems that slow down, restrict, or inconvenience customers will lead to a lack of trust and loyalty in the institutional-customer relationship, instead of nurturing the reliability and convenience which generates loyal and satisfied customers—customers who contribute to a financial institution’s long term market success.

What is good customer experience in financial institutions?

Ernst and Young’s report Banking in Asia Pacific states that:

“The challenge is to find a comfortable balance between the competing elements of trust, convenience, data security and innovation.”

When it comes to financial institutions creating great customer experiences, the institutions must find ways of managing their existing (and increasing) compliance responsibilities, while at the same time creating a simple, accessible, and innovative operating model.

This only becomes more challenging as digital transformation initiatives occupy the C-Suite across the Asia-Pacific region. As more channels are created for customers to access financial products and services, the complexity of delivering, and securing, the system becomes greater. Complexity and regulation to accommodate new customer expectations and ways of doing business, imposed on top of already fragmented compliance systems have the potential to sink entire initiatives without a holistic, systematic approach to how compliance is ‘done’ across the organization.

In the next blog we will be getting to the juicy part: exploring how financial institutions can create a transparent, agile compliance system as a foundation for their customer-centric operating model.

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Related Articles:

Compliance & Customer Experience:

Part #1: Exploring APAC’s Regulatory Compliance Context

Part #2: Top Compliance Challenges for APAC Financial Institutions

Published on: March 15th 2017 - Last modified: February 19th, 2018